The queue to check out of RBI’s prompt corrective action regime is slowly forming

New Delhi: While the first bank to check out of the Reserve Bank of India's (RBI) prompt corrective action (PCA) regime is set to be Dena bank on account of its merger with Bank of Baroda and Vijaya Bank, the rest of the banks also seem to be queueing up to exit the rigorous framework. It is difficult to say when the 10 lenders who are still quarantined will be able to come out of the PCA framework, but the recent commitment that came from the government on capital infusion suggests that the day may not be far.

The government has said that it will soon infuse about Rs 27,000 crore into six PCA banks. It is also willing to pour in Rs 41,000 crore over and above the original commitment of Rs 65,000 crore into 21 public sector banks as part of the bank recapitalisation plan.

Investors holding the scrips of these lenders also seem to be thinking the same as six of them have surged more than 10 percent in the last three weeks since the news came out. The government has said that it will soon infuse about Rs 27,000 crore into six PCA banks. It is also willing to pour in Rs 41,000 crore over and above the original commitment of Rs 65,000 crore into 21 public sector banks as part of the bank recapitalisation plan.

While there is no clarity on which banks will be the beneficiaries of the recapitalisation plan, investors are hoping that the sickest banks will get the most attention from the government. The same seems to have happened during the previous round of infusion in 2018. The fact that Bank of India received a whopping Rs 10,086 crore infusion last month shows how serious the government is about putting life back into the lenders.

Analysts believe that Bank of India, Oriental Bank of Commerce and Corporation Bank now have a strong chance to exit PCA.